Bajaj Auto Limited Q1 FY25 Earnings Conference Call Insights

Key highlights from Bajaj Auto Limited (BAJAJ-AUTO) Q1 FY25 Earnings Concall

• Financial Performance
  • Revenue from operations grew by 16% to nearly INR 12,000 crores.
  • EBITDA reached 20.2%, crossing INR 2,400 crores with 24% growth.
  • Third consecutive quarter of 20%+ EBITDA despite growing EV portfolio.
  • Spares now constitute 11% of revenue.
  • Financing penetration was 75% for motorcycles and 90% for three-wheelers.
• New Growth Platforms
  • Recently launched three new platforms: CNG bike, sub-one lakh electric Chetak, and new plant in Manaus, Brazil.
  • These platforms provide access to new business opportunities.
  • Alliance to target middleweight segment in India and overseas.
  • Development of e-auto (e-three-wheeler) to enter restricted three-wheeler markets.
  • Company plans to continue creating and scaling up growth platforms.
• Export Market Challenges
  • Small but steady revival in overseas markets, with fewer countries in stress conditions.
  • Africa continues to underperform, especially Nigeria, due to currency devaluation and inflation.
  • Sales in Nigeria dropped from 50,000 per month benchmark to under 5,000 in April, recovering to 15,000 levels.
  • Company down by 40% in Africa compared to Q1 of previous year.
  • Positive growth in Middle East, North Africa, Asia, and Latin America markets.
• Domestic Motorcycle Success
  • Strong position in 125cc+ segment, which became 51% of overall industry.
  • Market share of 25% in top half of the industry, just 2% short of leadership.
  • 75% of sales coming from the top half, significantly impacting top and bottom lines.
  • 40% market share in 150cc+ segment driven by Pulsar portfolio makeover.
  • Launch of biggest Pulsar, NS400Z, well-received with 2,400 unit bookings
• CNG Bike Innovation
  • Launched Freedom 125, world’s first CNG bike, to an enthusiastic reception.
  • Offers 50% savings on fuel bill with dual fuel capability.
  • Targets mileage-conscious customers in 100cc to 125cc segment.
  • Addressable market of 450,000 to 500,000 customers per month.
  • Phased launch starting with Maharashtra and Gujarat, expanding to Delhi and Kerala in Q2.
  • Initial capacity of 10,000 units per month, scaling up to 40,000 per month by Q4.
• Electric Portfolio Growth
  • Electric portfolio revenue in FY ’24 was four times that of FY ’23.
  • 14% of domestic revenue now contributed by electric portfolio, which includes both electric three-wheelers and electric two-wheelers.
  • Company committed to investing for competitive growth in this space.
  • Plans to expand electric business significantly in the future.
• Commodity Cost Management
  • Slight uptick in costs for aluminum, copper, rubber, and noble metals.
  • Relief from steel, nickel, lead, and palladium prices.
  • Cost reduction efforts and balanced commodity basket kept material cost impact neutral.
  • Pricing remained flat overall, with ICE portfolio increases offsetting electric portfolio reductions.
  • Current outlook suggests potential inflation in costs for Q2, especially in aluminum and copper.
• Future Business Priorities
  • Sustaining momentum in domestic business and winning in upcoming festive season.
  • Recovering and increasing export volumes.
  • Expanding capacity, capabilities, and network for new businesses and launches.
  • Developing strategic growth enablers through wholly-owned subsidiaries.
  • Managing P&L dynamically in the context of rising commodity costs.
  • Potential investments in building new businesses while sustaining margins
• EV Revenue Breakdown
  • 14% of Bajaj Auto’s domestic revenues come from the electric portfolio.
  • Electric two-wheelers contribute 60% of the EV revenues.
  • Electric three-wheelers make up the remaining 40% of EV revenues.
• Industry Outlook
  • The overall two-wheeler industry is expected to grow by 6% to 8%.
  • The 125cc+ segment is anticipated to grow faster than the industry average.
  • Bajaj Auto aims to outpace industry growth in the premium segment.
• Capex Guidance
  • Bajaj Auto expects capex to be in the range of INR 700-800 crores for FY25.
  • A significant portion will go towards commissioning a new electric three-wheeler facility in Bharuch.
  • The investment also includes building capabilities for the electric vehicle segment.
• CNG Motorcycle Launch
  • CNG is available in 335 out of 500 top towns, accounting for 70% of the market.
  • CNG station density varies significantly across locations.
  • Initial bookings are around 4,200, with 90% from Maharashtra and Gujarat.
  • Majority of bookings are for the top-end model.
  • Customer demographics are diverse, indicating broad appeal.
• Freedom 125 Capacity/Expectations
  • The addressable market is about 400,000 to 500,000 units per month.
  • Current capacity target is 40,000 units by year-end.
  • The company is cautious about expanding capacity before assessing adoption rates.
  • Substantial capacity expansion is possible with a six-month runway.
  • Bajaj aims for a respectable market share in the bottom half segment.
  • The company targets a 25% market share in the top half segment.
  • Bajaj hopes to achieve a 40-50% market share by upgrading customers to the 125cc segment.
• Market Segmentation Trends
  • The 150cc to 250cc category has shown recent growth after a period of shrinkage.
  • Bajaj’s new N 250 model sold over 1,000 units in the previous month.
  • There’s no significant evidence of down-trading from 350cc-400cc to 160cc segments.
  • Within-brand migration to lower-priced variants may occur if products are very similar.